Introduction on Crypto Wallets

Introduction on Crypto Wallets

There is a lot to be said about blockchain technologies and cryptocurrencies that came out of them as a result. However, in this article, we talk about the most important part of the crypto network, one that ensures Bitcoin’s very existence – wallets.
There are many types of wallets and platforms that developed their own solutions. These storage programs differ in terms of security, cryptocurrencies supported, and additional services that they provide. If you are a beginner that wishes to purchase cryptos for the very first time, this guide is a must-read.
Crypto Wallets – What are They?
Putting it simply, wallets are storages for your cryptocurrencies. Think of it as a bank account, where you can deposit, transfer out, or withdraw fiat currencies, such as USD, CAD, SGD and others. However, whereas banks have numerous intermediaries, crypto wallets usually have one or none service providers.
As a part of the blockchain network, these wallets provide detailed reports regarding all of your transactions, recorded in the blockchain’s ledger of the cryptocurrency you are using. You can also have more than one cryptocurrency in a single wallet.
Crypto wallets use address codes, expressed in letters and numbers. The size of the code varies according to the cryptocurrency, with usual length ranging between 14 and 35 alphanumeric characters. Addresses are usually represented as QR codes for mobile phones to read easily. Just like your email address can receive emails, it can receive cryptos from others.


Example of BTC Wallet Address

Additionally, there are a few tools available to you, depending on the chosen platform. These include PIN code, passphrase, private keys, and multisignature (multisig) functions. The passphrase is a set of randomly generated words, used as a phrase for wallet recovery.
Multisig functions demand additional transaction confirmations from other users, providing time if someone is trying to steal your coins. Due to a large number of scammers, it is important to choose platforms that do not provide your information to third parties.
Wallet Keys
Whereas you have an address code, you need the private key for that address to allow the transfer to go on. If the address is like your email address, the private key is like the email's password. It is also a series of numbers and letters, generated by the wallet you registered in (or created, depending).
Private keys are known only to you, securing your balance against hacking attempts. Losing your private key means losing the coins in that address.


Example of Wallet Address and Private Key

Wallet Types
There are several types of cryptocurrency wallets, each coming with own pack of advantages and disadvantages. They differ in terms of security layers provided, as well as how easy they are to manipulate.
Online Wallets: These are the most numerous crypto storage platforms out there in the industry. They require simple registration, have very little protection layers, and are mostly free to use. Their main purpose is to provide fast liquidity and easy-to-handle interface for small trade investments. Many of these do not employ encryption on keys and are easily hacked. Many exchanges experienced crippling situations due to lax safety measures.
Desktop Wallets: Open-source desktop wallet programs come with much higher security than online storages, as they save your private keys in your computer, which is often encrypted using a password, and they are protected by your computer’s antivirus software. You can download one of the existing solutions or develop your own crypto wallet.
Take note that some of the platforms out there might take quite a bit of your hard disk space. You would be forced to download entire blocks, from the very beginning.
Mobile wallets: One of the newest wallet developments are certainly open-sourced mobile platforms. With the tip of your fingers, you can create your own storage space within the blockchain network. Additionally, with wallet apps, one can keep an eye on the balance easily enough. The software is usually available for both Android and iOS users. These are becoming quite popular in recent months, with many new exciting projects already planned out. Also, given the constrained software runtime environment, mobile wallets can be more secure than desktop wallets.
Paper Wallets: You can have an address code and a private key on a piece of paper, making up for a paper wallet like the following picture. The only downside is the paper itself, as you can lose it and thus lose your balance. They are also pretty cheap to make, as you need a printer, a piece of paper and a computer.